Auto stocks in reverse gear after Supreme Court order

Shares of several automobile companies fell on Wednesday after the Supreme Court banned sale of BS-III vehicles.

Hero MotoCorp was the biggest loser as its stock plunged 3.15%, closing the session at R3,323.25 on the BSE.

Shares of several automobile companies fell on Wednesday after the Supreme Court banned sale of BS-III vehicles. The BSE auto index ended the session 0.49 % lower at 21921.77. Hero MotoCorp was the biggest loser as its stock plunged 3.15%, closing the session at R3,323.25 on the BSE. The intra-day low for the stock was R3,180. Bajaj Auto was among the gainers, with the stock rising about 0.25% to close at R2,831.1 apiece since the company has virtually no inventory of BS-3-compliant vehicles.

“The India CV sector has been impacted by the recent confusion around the emission deadline – whether it’s on production or on registration. Lack of clarity on the ground has led to an increase in discounts by 12-14%, as the industry awaits the Supreme Court’s hearing on the matter,” Vijay Somaiya, VP – treasury & IR at Tata Motors, had earlier said during an annual India auto conference.

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Dealers of Ashok Leyland had pointed out in the annual India auto conference that pre-buying had been much lower than initially expected due to confusion over changes in the emission norm. “Assuming the deadline applies to registration, fleet owners have postponed their purchases with the expectation that dealers will have to liquidate their BS-III inventory at a high discount,” said the auto sector report by Axis Capital.

Additionally, emission regulations are likely to get tighter, with the ministry of road transport and highways proposing a direct shift from BS-IV emission norms currently to BS-VI norms by April 2020 for new vehicles and April 2021 for existing vehicles, Nomura said in a research report. Interestingly, manufacturers such as Bajaj Auto, Toyota and Hyundai were batting for the ban on sale and registration of vehicles with BS-III engines.